Tax Saving FD for Sec 80C Deductions
Updated on: Jan 11th, 2022
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4 min read
Tax Saving FD for Sec 80C Deductions
What is Tax Saving FD ?
Tax saver fixed deposit (FD) is a type of fixed deposit, by investing in which, you can get tax deduction under section 80C of the Indian Income Tax Act, 1961. Any investor can claim a deduction of a maximum of Rs.1. 5 lakh by investing in tax saver fixed deposits.
- Lock-in period of 5 years
- Interest earned is taxable
- Rate of Interest ranges from 5.5% – 7.75%
Earn 120% higher returns in Tax Saving Funds
- Higher interest rates than FD/PPF
- Lowest lock-in of 3 years
- Interest earned is not taxable
Comparison with other Tax Saving Investments
Along with FD there are many other tax savings investment options that help you build your wealth, such as ELSS Tax saving Mutual Funds, PPF and NSC. Although Fixed deposits are deemed as one of the safest savings option that help you increase your finances without falling victim to market highs and lows. But the returns from these schemes are taxed. This is where ELSS stands out with its dual-benefit – its returns are generally higher and tax-free. This coupled with a mere lock-in period of 3 years is all the more reason for you to invest in ELSS now.
| Investment | Returns | Lock-in Period | Tax on Returns |
| 5-Year Bank Fixed Deposit | 5% to 7% | 5 years | Yes |
| Public Provident Fund (PPF) | 7% to 8% | 15 years | No |
| National Savings Certificate | 7% to 8% | 5 years | Yes |
| National Pension System (NPS) | 8% to 10% | Till Retirement | Partially Taxable |
| ELSS Funds | 12% to 15% | 3 years | Partially Taxable |
Yes! I want to Save Tax
Disclaimer: Mutual fund investments are subject to market risks. Please read the offer documents carefully before investing.
Benefits of Tax Saving Fixed Deposits
Fixed Deposit is a financial tool that has enjoyed iron-clad trust of the general population since decades, when it comes to savings. Since it is a bank-based investment product, closely monitored by RBI, investors are assured of its safe and low-risk nature. The money deposited is safe and is easily redeemable with interest once it reaches maturity.
- FD has a higher interest-earning potential than savings account
- FD allows only a one-time lumpsum deposit
- TDS from the interest on FDs is applied
- Flexibility in the amount and tenure for investors
- Get tax deduction up to Rs.1, 50,000 under Sec 80C
- It is easy to get loan on the FD amount for lesser interest
- Premature withdrawl inot available
Earn 120% higher returns in Tax Saving Funds
- Higher interest rates than FD/PPF
- Lowest lock-in of 3 years
- Interest earned is not taxable
- Option to invest monthly or one-time
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Frequently Asked Questions
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Who should invest in tax-saving FD?Anyone looking for a shorter lock-in period and seeking a guaranteed return tax-saving option should invest in these fixed deposits.
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How can I open a tax-saving FD?Investing in a tax-saving fixed deposit is very easy. You can open an account online or at a bank branch. Different banks offer different interest rates on tax-saving FDs, so it is best to compare rates before you make an investment.
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Is tax-saving FD risky?Tax saving fixed deposits are riskfree. The amount you invest in it is completely protected and the returns are also guaranteed.
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What is the tax-saving FD interest rate?Tax-saving fixed deposits have a fixed interest rate that remains the same throughout the 5 year tenure. The interest rates for Indian citizens, HUFs and NRIs vary from bank to bank and begin from around 8 per cent. Senior citizens and bank staff members are offered higher interest rates. The interest is taxable, deducted at source, and added to your income.
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What is the tax-saving FD investment limit?The minimum investment that can be made in a tax-saving fixed deposit is Rs 100 while the maximum is Rs 1.5 lakh in a year.
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What are the tax benefits of these FDs?The amount invested in a tax-saving fixed deposit is eligible for tax exemption under Section 80C. This amount can be a maximum of Rs 1.5 lakh a year. In case of joint holders, the tax benefit is available to only the first holder.
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What is the tenure of a tax-saving FD?Tax-saving fixed deposits have a lock-in period of 5 years. No premature withdrawals, loans or overdraft facilities are available against tax-saving FDs.
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Who can invest in tax-saving FD?Indian citizens, senior citizens, HUFs and NRIs can invest in tax-saving fixed deposits.
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What happens upon maturity of tax-saving FD?When the fixed deposit term ends, the money comes back to your bank account.
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Anything else I should know?Tax-saving fixed deposits offer a nomination facility. A tax-saving FD can be transferred from one bank branch to another.
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